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Embracing ESG trend in Alberta oil patch
Premier Jason Kenney does U-turn to promote ESG standards; launches secretariat in hopes of stemming tide of investment bailout Gary Park for Petroleum News
A fad or a fixture?
That’s the question swirling through corporations and governments these days as decision-makers - like it or not - get to grips with three letters, ESG, and determining whether the scoring methodology associated with the annual evaluation of environmental, social and governance performance has become a vital cog in the industry machine.
The answer seems increasingly clear: Get used to ESG without delay or pay the price.
What is already clear is that companies and investors are scrambling to get on the bandwagon, prodded by government actions to tighten the evaluation of thousands of factors that affect ESG scores.
S&P Global has offered a guide to help participants take control of their ESG performance by offering an insight that “gives you the power to determine, benchmark and communicate ESG opportunities and risks to avoid pitfalls and accelerate progress.”
Alberta opens ESG office In Canada’s hydrocarbon industry, the emergence of ESG gained serious momentum in late February when the Alberta government announced in its 2021-22 budget that it was opening an office to promote ESG measures in hopes of stemming the tide of investment bailout from the province’s oil sands and its wider energy sector.
That comes only two years after Premier Jason Kenney called investor concerns about climate risks “the flavor of the month.”
A new ESG secretariat in the Alberta government will have an initial C$1 million infusion and a mandate to stretch its role to other industries by coordinating policy action and advocacy efforts.
Kenney told the Globe and Mail that the Alberta government, after 15 to 20 years of promoting economic development in different ways, is now “upping our game.”
“Part of our message is: To focus only on emissions in the broader ESG spectrum is not the right path,” he said.
Kenney has already carried that message to London when he met with banks and investment houses in an effort to demonstrate that oil sands producers are making strides to reduce per-barrel greenhouse gas emissions and on other environmental issues.
Energy Minister Sonya Savage, who was a senior executive at Enbridge before entering politics, was a first-hand witness to a growing emphasis on ESG which she said has now become a “fundamental and central thing for the entire industry.”
Sluggish response to ESG However, S&P Global, in its latest Sustainability Yearbook, which awards companies that have demonstrated superior performance, reports a somewhat sluggish response to ESG.
More than 7,000 companies were assessed in 2020, but only 631 posted ESG scores that gained them a place in the Yearbook.
PwC, the global professional services network, said ESG metrics have become leading guideposts for investment, but noted that over the last decade awareness of the benefits of climate action has drifted in the opposite direction among Canadian CEOs from 21% to 18%.
The firm said it’s time for those leaders “to seize on ESG as an opportunity to embed longevity and resilience into rapidly changing industries and business models.”
Ben Brunnen, vice president of oil sands at the Canadian Association of Petroleum Producers, showed no sign of disagreeing with PwC’s stand.
He said the new Alberta secretariat, regardless of its modest beginnings, could fill a void in defining ESG metrics and tracking how the petroleum industry is meeting its goals.
“If we can get some objective, consistent, complete and compatible data on ESG performance, our industry can … start to demonstrate its performance to international markets in order to attract capital,” he said.
In fact, despite PwC’s observations, BMO, based on a third-party assessment, said Canada is producing some of the “most ethical and environmentally sustainable oil barrels in the world,” ranking No. 1 in all ESG categories among nations with the largest oil reserves.
The Alberta government has enlisted the help of the Eurasia Group, a New York-based political risk consultant, for help in promoting investments in the energy sector and navigating investors’ ESG frameworks.
Savage said a C$125,000 contract with Eurasia helped Alberta when it was “staring down negative oil prices and was not sure exactly where it was heading.”
Eurasia said in a February report that ESG considerations in financial sector regulation present “one of the most substantive opportunities for President Joe Biden’s administration to advance climate policy.”
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